[Above Illustration Courtesy of CRAIN'S NEW YORK BUSINESS]---------------

Dear Friends, Futurists and Entrepreneurs:

Wall Street and Washington (through the US Federal Reserve Board) tell us that their is no danger of inflation during the course of the "foreseeable future" and that key interest rates will be held stable in the absence of a threat and in order to aid in the economic recovery believed by many to be occurring within the United States.

The classical example of inflation ("Classic Inflation") is a decrease in the value of currency such that more of it is required to purchase the same goods as could be purchased with a lesser amount previously.

The picture that is frequently painted is that of some defeated man or woman pushing a bushel basket filled with paper currency (usually US dollar bills) to the supermarket in order to buy a loaf of bread.

A note of caution is in order -- a very misleading "seeming deflation" can be created in a situation where there is insufficient available income (amongst consumers) to purchase goods or services at any price. That is to say, by way of illustration, that if I am unemployed and you (an aggressive and optimistic real estate broker) are showing me a house that sold four years ago for $500,000 which is now on the market for a mere $50,000, I still won't buy it. The marketplace, driven by desperation from the "sell side" starts lowering prices in order to clear inventory, but, ironically, regardless of how low the prices fall, too few people have adequate money (due to unemployment, vanishing pensions, decimated retirement funds, and the like) to make these purchases at any price. And these prices are part of the market basket of goods and services that the government uses in order to determine inflation.

Theoretically (or actually), a nation can be experiencing "seeming deflation" even when the average family barely has adequate funds to pay for the barest of necessities.

In fact, because of business consolidations (where giant companies buy other giant companies, as in the case of Unilever negotiating to Purchase Alberto-Culver, or Southwest Airlines negotiating to acquire or merge with AirTran), marketplace competition is being eliminated due to fewer and fewer choices, and the consuming public is being increasingly faced with sharply rising grocery costs, airfares and the like -- as the quality of goods and services declines and as actual incomes and wealth decline. The reality is that when large companies combine, many jobs are lost.

Being a simple person myself, I look at the inflation situation simply: If I have lost my job, and I don't have any money, I cannot afford to subsist regardless of how much prices fall. I actually feel the full effect of inflation (i.e., I cannot put together enough cash to pay the mortgage, pay the note on the car and to feed my family) while the government is telling me good news about how we are in a period of either deflation or stabilizing prices...I cannot afford to send my children to college, and even if they were to get massive scholarships to most universities, they would not be able to get decent entry-level (or any-level) jobs upon graduation.

The tough reality on Main Street is that REAL inflation, the kind that severely and adversely impacts consumers, is actually climbing despite that CLASSICAL inflation (an economic notion that doesn't apply when unemployment and under-employment are quite high and continuing to increase). Using numbers, if my income decreases 100%, and the price of food remains 'stable' or increases 'modestly', I feel the same effect as if I were living in an economy where hyperinflation was in the newspaper headlines.

This situation does not improve if jobs are fewer and declining, but certain specialty positions are commanding higher salaries. If the interest rates charged by banks are at an all-time low but they are not making credit available to me, I cannot afford many of the necessary things which I purchased using credit before... things like my home, my car, my appliances.

When large stores which sell durable goods are advertising plans where you can purchase something today on a "layaway plan" where no payments are required for 12 or 18 months, and afterwards you (the lucky consumer!) can pay the balance off in non-interest-bearing installments, I do not see a great opportunity or a sign of economic recovery if I do not actually anticipate the ability to be able to make the first payments when they begin in a year and a half because I don't know if I'll be employed at that time. That is the reality.

I do not need to read The Financial Times or The Wall Street Journal once the prices of the things that they quote have become irrelevant to me.

No bargain is a bargain when I do not have a job, a positive prospect for a job, or any savings.

Broke is broke.

Forecast: Over the next 18 months, anticipate the following in the US, and in its industrialized European counterparts:

More mergers and consolidations;

Fewer permanent jobs, and a decrease in "real salaries" and "real income" (unless you work for Goldman...);

Rising prices on necessities;

A continuing reduction in the availability of consumer and small business credit;

Marginal businesses failing at an increasing rate;

A decline in the number of students graduating college, and a greater portion of students (at an older median age than that which had historically been associated with college attendance);

An increase in taking a year or two off (to work, travel, or live off of their parents or with friends) after high-school;

A significant increase in trade school advertising, and in people graduating with certificates instead of degrees;

Fewer divorces (due to the expense); and fewer office or workplace extramarital affairs (due to the expense and the decline in workplace attendance);

Declines in the quality of the customer service experience;

Very expensive airfares;

The beginnings of a precipitous rise in gasoline and fossil-fuel products -- an ominous sign of both REAL and CLASSICAL inflation on the way, and impacting the prices of everything;

A sharp increase in the cost of healthcare and healthcare insurance;

An increase in the percentage of suicides amongst two groups of segments of the population -- college-aged youth and Baby Boomers;

An increase in crime across all categories;

The disappearance of an increasing number of paper publications (mostly periodicals, journals and the like).

Who will fare best during the next 18 months, given this short-run futurescape?

Those who will fare best will likely be: frugal trust-fund offspring of dynastic families; directors and executive officers of the largest corporations, especially financial, pharmaceutical and oil conglomerates; healthcare professionals; certain licensed tradespersons (plumbers, for instance); cerebrotonic computer geeks; and, of course, intrepid entrepreneurs --my favorite group of people, and my greatest hope for the future.

Where there is entrepreneurship, there is great hope. Hope is so very important.

Tuesday, September 14, 2010

The entire burden of fighting recession, financing deficits, and creating a significant and lasting economic stimulus will fall on each nation’s central banking system.

US Federal Reserve Chief Ben Bernanke and his counterparts in Europe will launch a second, even bigger round of money printing, possibly within the next year. Mr. Bernanke is concerned about deflation, so his enthusiasm for money printing knows no bounds. Sadly for all, this supposed deflation in the US is largely attributable for the lack of financing [the availability of easy credit used to push up the prices of many large-ticket items] for individuals and small to medium-sized businesses; the loss of income to make purchases of anything except the essentials and some diversionary frivolities (something akin to gambling with your last few dollars or going on a bender before the Sun goes out)

Expect major intervention by the central bank of central banks – The Bank for International Settlements (“BIS”), located in Switzerland -- to coordinate this effort amongst the central banks of Europe, the US, and all of the other bulwark “industrialized” nations throughout the world. You’ll be hearing a great deal about the BIS in the media for the first time in history.

The BIS is a little-known, largely understated clearing house bank for all of the major central banks – it is perhaps the most powerful entity in the world concerning the settlement of debts in multiple currencies among sovereign nations. It plays a major role in currency valuation, sovereign credit ratings, and interest rates on debts between nations (usually through their respective central banking systems.

The BIS will finally emerge from the shadows and enter the spotlight – expect to be hearing more about the BIS within the next 6 to 9 months. The sovereign debt crisis is merely in a temporary media “time-out.” It will be returning with a vengeance within the year.

The lesson here, which very few government policy-makers refuse to learn (or understand all too well, for those of you who are conspiracy theorists), is that printing currency and incurring debt and interest will never, ever substitute for productivity and profitability. You cannot borrow your way out of debt.

Nations full of borrowers will become the ultimate source of repayment for all of this debt (in the form of taxes) and have already become enslaved by the money printers.

Friday, September 10, 2010

It is highly likely that tensions between the two principal factions of the Islamic world – the Sunni Muslims and the Shia Muslims -- will heat up within the next year as Iran builds up its nuclear threat potential.

Iran’s Islamic neighbors are far more fearful than they are currently letting the West know. There is the possibility that the war between these two factions (which has been seething for more than 1,000 years) for control of the Islamic world could actually outshadow, by some order of magnitude, the increasing hostilities between the Islamic and non-Islamic peoples of the world.

Iran, which is allied with the Arab nations which harbor the greatest political instability and which breed terrorists, will likely initiate events leading to a tremendous conflict between the two factions. The horrific fighting involved would not only spread like a brush fire throughout the Middle East, but it could leak out into much of Europe, as well.

The Staits of Hormuz, which are dominated and controlled (arguably) by Iran, are the principal artery through which Middle East oil barges must pass in order to supply industrialized nations with the fossil fuels which they require. At the commencement of hostilities, sometime in 2011, expect the Straits to be impassable – I believe that oil prices through the industrialized nations will skyrocket to their highest real level in history. In the US, precautionary demand, opportunism amongst the big oil companies, and speculation in the petromarkets could, in compounded effect, lead to the most rapid and precipitous rise in oil prices fo any country in the world.

Estimates are that prices could shoot up from their current levels to between US$160.00 and US$260.00 per barrel in the United States. Those invested in oil, petroleum processing/ refining and delivery will stand to reap enormous gains, while those invested in oil-dependent industries will be crushed -- as will all fossil-fuel consumers.

Wednesday, September 8, 2010

US Federal Reserve Chairman Ben Bernanke, the monetarist who pumped billions of dollars into errant and spoiled commercial banks, investment banking firms (if you can actually ascertain the difference -- as if the distinction had any relevance) and insurance companies to keep them afloat (i.e., be certain that the Olympian inhabitants of the plush executive suites of these institutions were able to continue to be paid enormous compensation despite the purported insolvency and failure of their respective companies due to their breach of fiduciary duty, unbridled and boundless greed, sense of entitlement, and 'above the law' status) because they were "essential to the US economy," and were "too big to fail," has decided on a policy change.

After subsidizing the gluttony and stupidity of these behemoths, and realizing, at this late date, that 1) none of the capital infused has gone into the private sector or into consumer hands in the form of credit facilities, loans and the like; 2) no new private sector job creation resulted; and that these institutions are still either making their money through trading (a high-risk, big-ticket business) or buying government-issued debt securities, he has revised his rhetoric.

Now Mr. Bernanke, without admitting the abysmal failure of his preferential and unprecedentedly generous subsidy of sin, but realizing that he must somehow differentiate between the way he printed and gifted fresh money before and they way he intends to get the presses rolling again now if the US economy continues to decline (the printers are on standby), has adjusted his message.

While he has not learned that awarding vast sums of low-interest-bearing debt to a small fraternity of geased pigs does not result in a de facto stimulation of the economy (which can only be rescued with increased productivity brought about by powerful and positive incentives -- tax credits, small business loan guarnatee programs, jobs creation credits, Investment Tax Credits, Research and Development Tax Credits and other rewards for the entrepreneurial sector's historically demonstrated initiative, ingenuity and permanent jobs creation), he is now saying, in effect, that he will allow some of these naughty big guys to fail if they don't pass "his" new and special standard for "too big to fail" -- now he wants them to at least show that have sufficient "collateral on the books" in order to secure the repayment of funds pumped in by the Federal Reserve System.

1. Mr. Bernanke still does not concede that issuing and incurring debt can not eliminate a deficit;

2. Mr. Bernanke has no means of determining which of these big flopsters has sufficient collateral or not. I believe that he will have to use his best financial analysis and appraisal skills (none), in order to make an individual credit decision regarding who has to get off of Subsidy Island and who can stay, on a bank-by-bank basis, which is simply unrealistic;

3. Mr. Bernanke still has yet to create, with the intervention of the Legislature and the White House, a strict set of guidelines for the utilization of this bonanza of money to go to productive small and entrepreneurial businesses, and to individuals for mortages. This money remains trapped in the hands of the large institutions who are using it to either a) pay bonuses; b) gamble in trading; or, c) buy government debt instruments. The banks have tightened credit to the point that it no longer matters what prevailing interest rates are and it doesn't matter how much money they have -- they are not putting any money back into the economy, and they are tightening up credit standards to point of impossibility -- even though their own aggressiveness in lending and gambling...back when they were collectively asleep at the wheel...played a great role in precipitating and deepening this crisis.

No, ladies and gentlemen - Do not expect a solution, or even an easing of the current economic crisis in the US through Mr. Bernanke's "new" but philosophically unchanged and unsound approach. Expect more money to be printed, an ensuing devaluation of the US dollar, and increasing taxes on the working class (those few members remaining) to pay for the misdeeds of the others.

The big institutions must have some adult supervision (with a threat or two to keep them interested in complying) to be certain that their next batch of "free money" goes out to emerging enterprises, small businesses and to consumers who need housing. And this latter group of companies and people should be encouraged and given incentives instead of being threatened with decreasing services, a miserable economy, working until the moment of death and wages that cannot come close to meeting even a minimalist standard of living. Too many smart people are leaving the country.

Who is left?

The politicians, the policymakers and their powerful puppeteers. Strategic and patient international investors are waiting in the wings to assume domination through the smoke that accompanies a fire sale.

Monday, September 6, 2010

Violent hate crimes, principally against Muslims, will be on the increase in the US as the economy continues to fail, and as resentments and tensions grow between the US non-Islamic population and all people (categorically) of the Islamic faith, both within the US and outside of the US. Mosques will become the targets of fury in a wholesale backlash against Islam.

The population of the US, as well as the populations of some of the European superpowers (collectively, the "West") and a fearful component of the constituency of United Nations, is beginning to equate Islam with terrorism.

This is being exacerbated by: the current and contentious issues of the building of a mosque and cultural center (The Cordoba Project, or the Cordoba Community and Cultural Center) at close proximity to the scene of the 9/11 attacks on the World Trade Center; Iran’s building of a nuclear reactor and consequent potential to create nuclear weapons; failed international efforts to “democratize” Iraq, the futile and costly (in money and Human lives) War On Terror in Afghanistan; and the increased power and widening influence of al-Qaeda, Taliban and other radically violent Islamic fundamentalist groups in Afghanistan, Pakistan, Iran and Iraq.

In addition, there is the time-honored perception (which is largely mistaken) in many fossil-fuel dependent nations (the United States being a classic case-in-point of indolence, false security, and addiction) that OPEC and a small group of wealthy sheiks is directly responsible for every increase in the price of oil and gasoline.

No matter how much offshore drilling there may be in the US (ever!), and no matter how much oil there may be up in the some of the Nordic countries, if a sheikh wrinkles his brow, oil prices immediately fly skyward in the West. It is a deeply-embedded reflexive behavioral pattern that is not likely to change as long as Humans continue to be Humans.

Friday, September 3, 2010

Expect increased hostilities between the US and Mexico due to: the “illegal immigrant” issue which is pitting individual US states (on the Mexican/ US border) against the US federal government; increasing power and dominance of Mexican drug cartels over legitimate governance; the increasing presence of Mexican and Hispanic gangs, and gang-related violence spreading throughout the United States; growing xenophobia in the US due to increasing unemployment, and the propensity of Human Nature to seek out an enemy (undocumented Hispanic workers, as well as all legally compliant Hispanic-Americans, as if there were no difference between the two) upon which to place blame for its economic woes; the rapidly-increasing and increasingly visible Hispanic population in the US (most of whom actually work at jobs that other US citizens would not consider doing, and very few of whom have actually displaced other non-Hispanic US workers); and the issue of the US becoming a two-language country (i.e., English and Spanish).

As US citizens pack their bags and grab what remains of their somewhat scrambled nest eggs to leave the country, Mexican nationals will be fleeing the escalating lawlessness of Mexico and finding their way into the United States by any means possible, regardless of any efforts on the part of the Coast Guard, US Border Patrol, and The Department of Homeland Security. There will also be an increased participation amongst the growing Hispanic population in the US in consumption, government and some entrepreneurial activity.

Anticipate the illegal drug, enslavement, prostitution and shakedown rackets to become increasingly dominated by large, well-armed and increasingly ruthless Latino gangs (operating in both the US and in Mexico), which are increasingly holding entire neighborhoods within the US hostage – it goes without saying that gang-related violence and human “collateral damage” will rise more rapidly now than ever.

There will be a perception among the US populace, and justifiably so, that the US borders (both by land and by sea) are becoming increasingly unsafe, and acts of small-craft piracy off of the coastline will become increasingly common. I wish that I could forecast a point of reversal in this type of activity, but I cannot foresee any improvement within the next three years, and I don’t want to hazard a guess beyond that limited time horizon.

This is a blog produced by Thomas Frey, Senior Futurist at the DaVinci Institute, and Google's top rated futurist speaker. Unlike most speakers, Tom works closely with his Board of Visionaries to develop original research studies, which enables him to speak on unusual topics, translating trends into unique opportunities.

Tom is an excellent writer with a very logical, coherent and non-politicized style of writing; he is also a top-rated speaker. I am inclined to agree with a great many of his trend citings and views. He is affiliated with The DaVinci Institute.